Any inventory system, whether it is manual or computerized, must have some way of recording what parts are in inventory, and in what quantity. In fact, this record of what is in inventory is the most fundamental and necessary portion of the Elliott's manufacturing system as well.
Because of this, several of the basic concepts of Inventory Management will be covered here.
Some of these concepts are not fully implemented within the Inventory Management package, but extend to the other packages. For example, allocation of material is not done by any automatic process within I/M. Instead, this allocation will be done from the Customer Order Processing, Bill Of Material Processor or Shop Floor Control package. Many of the data fields entered by way of Item File Maintenance are not used at all in the Inventory Management package, but are present so that the data will be available for one or more of the other packages, which use the Inventory Item File.
This discussion of the Item File will be broken down into sections dealing with these subjects:
1. Part Numbering
2. Allocation and Deallocation of Stock
3. Inventory Location Control
5. Safety Stock
6. ABC Analysis
7. Stocked vs Non‑Stocked, Controlled vs Non‑Controlled Items
8. Physical Inventory and Cycle Counting
9. Default Item (For quick entry of new inventory items)
10. Item Notes
11. Interaction with other Packages
The classical definition of a part is, anything which is unique in form, fit, or function. And if something is different in either form, fit, or function, it should have a unique part number. However, it is beneficial to a company to keep the number of its part numbers as low as possible. It is estimated that it costs a company between $2,000 and $3,000 for every part number it has on file. This includes the cost of any engineering drawings for the part, and for someone to manage the part on an on‑going basis. So it can be beneficial to give some thought to how you assign part numbers.
There are many different part-numbering schemes possible. In fact, there are probably as many different ways to define part numbers, as there are companies. The two main types of schemes that are in use involve either significant or non‑significant part numbers.
A significant part number is one which describes (at least partially) what the part is, such as a part number made up of the Product code, a couple of digits given to describing the size of the part, a couple more characters which describe the material the part is made of, etc. Significant part numbers have been widely used in manual systems wherein the data entry operator and the warehouse did not have a description of the part handy with every order or packing slip and could recognize what part was being addressed just by looking at the part number. Because they serve this purpose so well, significant part numbers can be quite helpful.
The major disadvantage to the use of significant part numbers is that after a period of time, so many variations of a part may come into use, or so many new parts may be added to existing product categories, that the system gets too complicated and cannot possibly cope with all the possible variations. In this case, it may be better to use non‑significant part numbers.
In a non‑significant part numbering scheme, part numbers may be assigned fairly arbitrarily, and without reference to product class, size, etc. This may be the best scheme on a computer system, since the description of the part is available to the operator for verification as soon as the part number is entered. And non‑significant part numbers certainly afford a good deal more flexibility than significant part numbers.
One compromise that is often used between these systems is to use a partially significant system, where only the first few characters of the part number are significant. Large distributors may find it desirable to simply assign parts which they market the same part numbers as their manufacturers have assigned to the part. But they cannot be sure that the different manufacturers will assign unique part numbers. So the first few characters of the part number may refer to the manufacturer, and the remainder of the characters can be the manufacturer's part number.
Allocation and Deallocation of Stock
The Inventory Management package allows you to keep track not only of the quantity on‑hand of each inventory item, but also of the quantity of the item which has been allocated to already existing customer or shop orders. There is a quantity allocated field in the Inventory Item record, as well as a quantity on‑hand field.
This allows you a great deal more ability to control your inventory, since you will be able to accurately determine what quantity of the item is actually available for use. Your prediction of requirements for the item will be more accurate than if you were basing it solely on the quantity on‑hand.
When a customer order is received for an item in the Customer Order Processing package, the material required to fill the order is allocated. This shows that the portion of the quantity on‑hand is spoken for, and should not be used for future orders. This allocation of the material does not affect in any way the actual quantity of the items that is on‑hand.
When a feature/option is entered in Customer Order Processing, the parent and all components are allocated. In Bill Of Materials Processor, the feature is put on order. When it is produced, the quantity on hand increases and all components quantity on hand and quantities allocated are decreased. In Customer Order Processing, when the order is posted, the parent quantity on hand and quantity allocated are decreased.
When a stocked and controlled parent item is entered as a work order in Bill Of Material Processor, the components are allocated. When it is produced, the quantity on hand of the parent is increased, and the quantity on hand and quantity allocated is decreased for the components.
Then when the material is issued to fill the order, the quantity on‑hand is reduced, and the quantity allocated is also reduced to reflect the fact that the material is no longer spoken for.
Inventory Location Control
Elliott's Inventory Management package allows you to maintain multiple stocking locations for each inventory item, along with quantity on‑hand and quantity allocated figures for each location. Thus you can obtain reports, which allow you to predict usage at each location.
The maintenance of the on‑hand and allocation figures for other than the main stocking location is done by way of the Inventory Location File Maintenance application.
When a customer order is received and entered into the computer, you specify which location is to fill the order. The on‑hand and allocation figures for that location are then updated to reflect the activity.
In the Item File Maintenance application, you will specify what the manufacturing or default location for the item is; the quantity on‑hand and allocated figures, which you will enter, refer to this manufacturing or default location.